Ministers must improve the rented sector

The government needs to consider how the positives associated with home ownership can be recreated i

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Publicly the government appeared upbeat amid warnings homeownership is set to decline to levels not seen since the early eighties. Promising to "stand right behind" first-time buyers, the housing minister Grant Shapps boldly told the Today programme that a typical bus driver would continue to grasp the property ladder.

This may have surprised the average bus driver earning £20,600 a year. The finding that the typical first-time buyer requires an average salary of £44,464, close to the top 10 per cent of all earners, will likely ring truer with low and middle income households priced out of the housing market. And the admission from a Downing Street aide that the predictions are "pretty traumatising" is a more realistic assessment of the challenge ahead.
Despite the economic barriers, many lower income households continue to aspire to own their own home. Shapps has said government should support this, although crucially, like previous governments, he has not yet shown how. However, there is a danger that such aspirational politics prevent politicians from accepting that for many this hope has become unrealistic, and in doing so they fail to respond to the needs of households priced out of homeownership.

The divergence between average incomes and house prices has been widely acknowledged but now low and middle income households have the additional hurdle to clear of high deposits. Since 2007 very high loan-to-value mortgages have disappeared and aspiring homeowners must now acquire considerable capital wealth. In itself this is not an unwelcome move, as more responsible lending will protect buyers and reduce pressures on the wider market. But with house prices high it inevitably means that lower income households will find it more difficult to buy. And with incomes falling, and the cost of living rising, saving for a deposit will remain a formidable task.

As a consequence more first-time buyers are now relying on family assistance. The number of unassisted buyers under 30 years old dropped from 57 per cent to 20 per cent between 2006 and 2009, while the number of younger buyers itself more than halved. For those on low incomes, whose parents are themselves perhaps less likely to be able to provide financial support, the deposit barrier remains considerable.

Despite the recession, average house prices still stand at £215,000 compared to average salaries of £21,300. Even if a first time buyer were able to obtain the equivalent of a year's salary for a deposit they would need to borrow more than nine times their salary to acquire a sufficient mortgage. For those in the bottom third of the population, earning just £15,000 per year, the gap between aspiration and reality seems even wider.

The government has announced a few schemes to help boost supply and support first time buyers, but these are too small-scale for the challenges faced. The affordable rent model will not provide the number of affordable homes required to meet demand, and risks forcing low income households into benefit dependency. Just 10,000 first time buyers will benefit from the shared equity Firstbuy scheme. Shapps's latest proposal is to use river boats to solve the housing crisis, a move unlikely to be welcomed by hard-pressed parents already outgrowing a one bed flat.

Against this backdrop it is unsurprising that the private rented sector has exploded from 10 per cent of all households in 1999 to 16 per cent in 2009-10. This has been allowed to happen by default and without the government taking a strategic view of whether the sector can meet the needs of this new demographic. Shelter frequently helps clients struggling because of high rents or the consequences of insecure, short-term tenancies. Longer-term we see people unable to plan for the future, with an estimated 2.8 million households putting off having children because of their housing situation.

Research by Shelter has found that low income households do not aspire towards homeownership in and of itself, but to the benefits it brings, such as security, safer neighbourhoods and sufficient space. The government needs to consider how the positives associated with home ownership can be recreated in the rented sector, by increasing security, improving standards and considering alternative investment models so those priced out of homeownership do not feel left behind. More fundamentally, ministers need to succeed where previous governments have failed and radically increase supply - beginning by reversing the damaging 60 per cent cut to affordable housing.

Kate Webb is the policy officer of Shelter.

Kate Webb is head of policy at the housing charity Shelter. Follow her @KateBWebb.